thermostats, lighting systems, phone systems, voicemail, switching and fax services. If the device is programmable, see your manufacturer for information about Y2K compliance and upgrades. If the device is not programmable, the chip is embedded and probably cannot be easily removed for testing. Often, removing the chip means breaking the device, which is not productive. If you can live with the failure of the device on January 1, 2000, you might just wait to see what happens. If you can't, contact the manufacturer, and ask about Y2K compliance.
The readiness of third parties
Even if you are fully ready for the year 2000, the third parties with whom you both deal may not be ready. Imagine how many others your business interacts with and depends upon: suppliers, subcontractors, consultants, distributors, the power company, the water company, shippers, airlines, banks, payroll services, messenger services, your 401(k) plan administrator. If any one of them is not ready, that may affect your company's readiness.
Federal governmental agencies report varying degrees of readiness for Y2K, and a good many of them will not make it in time. Most large businesses are working on it, but some won't finish in time, and many small businesses haven't even started. Some of them won't make it on time. What this means is that even if your company is ready, if just one critical third party on whom you rely fails, your company could still be shut down. Consider your third parties carefully. Ask the state of their Y2K readiness, (your lawyer will tell you how you should do this), and take action accordingly. See "A Triage Checklist for the Business Manager," below.
Between now and January 1, 2000
As the time remaining grows shorter, consultants and companies that are working on the Y2K fix are asking clients to sign contracts without warranties or performance standards of any kind, disclaiming any responsibility for anything that might go wrong. And the price of their work is going up. Before you sign any contract with a consultant or programmer, see your business lawyer.
So far, those people working at it have been working fast and furiously to fix the Y2K problem. However, expect a major shift in effort during the third quarter of this year from fixing to testing. Any urgent, comprehensive re-programming to fix bugs, like the ongoing Y2K fix, is likely to produce bugs of its own. Those that have been working on the Y2K fix will stop reprogramming, and start testing what they've done, so they will have time to fix these new bugs. Some commentators predict that the 11th hour shakedown to iron out those new bugs will be so extreme that much of traditional industry will come to a standstill, as companies and governmental bodies try to make sure that what they have done will work. And as we've learned, some of the tests will themselves cause problems and damage. Prepare as soon as you can.
II - The new Y2K disclosure law
On October 19, 1998, the Year 2000 Information and Readiness Disclosure Act was signed into law, and immediately became effective. Its purpose is to encourage the exchange of information about Y2K readiness. In brief overview, the Act:
1. Defines a Year 2000 statement. Any communication concerning an assessment, projection or estimate of the year 2000 processing capabilities of a party or entity. Section 3. (11).
2. Defines a Year 2000 readiness disclosure. Any written Year 2000 statement, either on tangible medium or in electronic form, which is clearly identified on its face as a year 2000 readiness disclosure. Section 3 (9).
3. Grants protection for Year 2000 readiness statements and disclosures made after date of enactment. Such statements shall not be admissible to prove the truth or accuracy of the statement in a covered legal proceeding, unless proven by clear and convincing evidence to be deliberately false or misleading. Section 4. (a), (b). This protection applies to Year 2000 statements made between July 14, 1998, and July 14, 2001, and to Year 2000 disclosures made between October 19, 1998, and July 14, 2001. Section 7. (a).
4. If elected, grants protection for previous Year 2000 readiness statements and disclosures. Year 2000 statements made after January 1, 1996, and before October 19, 1998, may also be excluded from evidence if (before December 3,1998):
A. the statement complied with the requirements of section three (9) when made, except that it was not designated on its face as a disclosure; and
B. within 45 days after the date of enactment of the Act:
i. individual notice is provided to all recipients of the Year 2000 statement including a copy of the statement with the designation that it is a "Year 2000 Readiness Disclosure" statement; or
ii. prominently posts such notice on its Year 2000 Internet Website beginning within the 45-day time period, and continuing for at least 45 days, and also uses the same method of notification as used to provide the original year 2000 statement. Section 7. (b). Also, see exception and recipient's right to object to notice in Section 7. (c).
5. Sets the conditions under which notice may be given by Website. Where notice is an issue, it may be adequate if made available by Website in a commercially reasonable manner, unless contract or course of dealing requires another medium. Section 4. (d).
6. Sets strict notice language requirements. Notice must designate the statement as a "Year 2000 Readiness Disclosure." Section 3. (9); Section 7. (b) (2) (B).
7. Provides a temporary exemption from anti-trust statutes. Section 5.
8. Does not impose a greater standard of care. Section 6. (c) (1)
9. Does not create a duty to provide notice about Year 2000 processing. Section 4. (d) (2) (B).
10. Creates a national Website to provide Year 2000 information. Section 9.
However, the Act:
11. Does not amend or alter any existing contract. Section 6. (b).
12. Does not apply to lawsuits pending on July 14, 1998. Section 7. (a) (2).
13. Does not apply to statements required by the section. Section 3. (11) (B).
14. Does not extend to consumer products. Section 6. (b) (2) (a).
How to use the Y2K disclosure law
Your right to elect protection under the Act for statements and disclosures made before October 19, 1998, expired on December 3, 1998, but you can take steps to assess your situation, and to protect future statements.
First, review all communications made beginning on January 1, 1996 to clients, vendors and others to determine whether any Year 2000 statements were made.
Second, consult your business lawyer to determine whether the statement complies with the Act, and what steps can be taken if it does not.
Third, ask your lawyer to tell you how to make a "Readiness Disclosure Statement" that comes under the protection of the new law.
Fourth, calendar the dates of applicability of the protections of the Act.
Fifth, calendar the date of your receipt of any readiness disclosure notice from your vendors or others, and the date 45 days after that. If you relied on their previous notice and would be prejudiced by the retroactive designation of the statement as a readiness disclosure, you have 45 days to object to the notice.
DO NOT GIVE Y2K "CERTIFICATIONS" UNLESS YOUR LAWYER APPROVES
III - A triage checklist for the business manager
A. Analyze your business--do we have a problem?
1. Form a Y2K team, even if it's a team of one. If your company is large enough to have departments, gather representatives from all of the departments, and your IT manager, if you have one. This is your Y2K Team. Get them together and come up with a game plan. Then, introduce the team to all of your employees.
2. All Y2K statements come from the Y2K team only. Make sure all of your employees know that they are not authorized to make any statements regarding the company's Y2K readiness. This is something to be handled by the team, with legal advice. Your lawyer will help you draft an appropriate Y2K disclosure statement.
3. Test to determine the scope of the problem.
a. Self test
A down and dirty (but not comprehensive) PC test is one you can do yourself if you're not on a network. Set aside a weekend when the office is closed, then begin:
1. First, back up everything. Do that without fail, because we're not sure what's going to happen next.
2. Reset the date on your computer to December 31, 1999, and the time to about 11:58 pm.
3. Turn off the computer, and wait about 5 minutes.
4. Turn on the computer, and after it boots up, check the date and time.
a. Does it show January 1, 2000? So far, so good.
b. Now look for Tuesday, February 29, 2000. Does it appear? Is it followed by Wednesday, March 1, 2000?
c. Look at the year 2001. Does it contain 365 days?
d. If you pass all these tests, your BIOS is compliant.* If not, your BIOS must be updated. Contact your hardware manufacturer.
5. Now, start again. Change the date back to the current date, and shut your computer down. After you boot up again, change the date to December 31, 1999 at about 11:58 pm. Do not shut down. Wait to see what happens. The first time we did this, we shut down the computer, and when we booted up again, the BIOS told the CMOS the correct date. This time, we won't shut down, so we'll see how the CMOS does on its own.
a. Does it roll over to January 1, 2000?
b. If so, next check for Tuesday, February 29, 2000, followed by Wednesday, March 1, 2000. Do they appear?
d. Look at the year 2001. Does it contain 365 days?
d. If you pass all these tests, your CMOS is compliant.* If not, your CMOS must be updated. Contact your hardware manufacturer.
6. Now, check each and every software program on your computer, starting with your critical programs. One by one, open them, enter and retrieve data, run reports, do a typical billing, log onto the Internet, check your web browser, E-mail and Website. Then check the dates, the leap year date and the day of the week. Does it pass every single test? If so, you're probably okay.* If not, you need to contact the software manufacturer for each program that failed any part of these tests. See your manufacturer's website for Y2K compliance information.
7. If your computers are networked, do not perform this test on your own. Arrange a time to test the entire network with your Network Administrator and Y2K team, or hire a professional. But each computer on the network must be tested. There's no shortcut here. If only one computer is non-compliant, it could affect all the others.
* On some computers, you may need software to test the BIOS and CMOS. Some software will also need special test software. See "Resources" below.
b. Hire a professional. If you do hire a professional computer consultant, determine what services you want him to perform--test only? Test and fix? Test and consult? Make certain that you can live with the contract terms. Remember that many Y2K consultants are asking clients to sign contracts without warranties or performance standards of any kind, and disclaiming any responsibility for anything that might go wrong. Make sure your lawyer reviews and makes appropriate changes to any contract presented to you.
4. Determine your priorities; set time deadlines for repairs.
This determination will depend very much on your type of business, and perhaps what work is in progress. Start with the work that needs to be done to stay in business. Work first on critical systems; expand to others as time and resources permit. Repair or replace hardware first, then software. Don't forget your programmable devices.
5. Review purchase contracts to determine who pays for repairs
If you purchased your hardware or non-compliant software recently, it may still be under warranty. Even if it's not under warranty, the manufacturer may be responsible for the repair pursuant to other contracts or laws, and you may have a cause of action against the manufacturer or others. If you recently purchased the business, including its now non-compliant equipment, you may have a cause of action against the seller. Your lawyer will be able to advise you.
6. Review insurance contracts to determine coverage
With your lawyer, review your insurance policies to determine if these losses are covered. Review comprehensive general liability, property, business interruption, D & O, and E & O policies, product liability, and any other policies you might have. As the Y2K problem has been unfolding, insurers have been attempting to exclude Y2K issues. But check. Your policy may be one that has not been modified yet, so that Y2K losses are covered.
Even if Y2K losses appear to be excluded, don't take what the policy says at face value. In Illinois, the Director of Insurance has sent notice to all Illinois insurers advising generally that blanket exclusions on commercial policies for Y2K losses are prohibited unless supported by valid underwriting data. Since this problem has never happened before, there is no valid underwriting data. Some commercial insurers are sending their customers "surveys" regarding their Y2K status, in an attempt to gather information for underwriting purposes. If you respond, and depending on your response, the insurer may have obtained valid information to assess the underwriting risk, and may exclude coverage. If you don't respond, they may be permitted to terminate your coverage altogether. Each case will be different, and how this requirement will be interpreted, exactly, is unknown.
7. Analyze the readiness of third parties on whom your company relies
Make a list of all of the third parities upon whom your company relies. Note those that are critical to your company's survival. What do you know about their Y2K readiness? Have you asked them? Have they sent you a Y2K Disclosure Statement? Should you verify what they tell you independently? You might want to consider doing so if their operation if critical to your survival. Is your agreement with them in writing? You might want your contract to include their promise that their Y2K readiness will not interfere with their meeting their obligations to your company.
8. Document your company's efforts toward Y2K compliance
Make sure that you document, in the corporate records, all of the steps taken to analyze and deal with the Y2K problem from the time you first began to work on it. Meeting Minutes of Directors and Shareholders should reflect all of the discussions of the topic, and the plans to take action. Your meetings with Department heads and others may also be evidence of the work you've been doing. Make sure your work is on the record.
9. Assess your company's risk for liability from Y2K matters.
Depending upon your business and its product or service, you can have an idea whether any third party is likely to make a claim against your company if it fails to achieve complete Y2K compliance. Make sure your insurance coverage is in place. Ask your lawyer to draft contracts to shift the risk to others whenever possible.
10. Before January 1, 2000...
Before the year-end, make hard copies of all important data. Retain bank statements and other financial records. Print calendars, important dates. Meet any time-sensitive deadlines before January 1, 2000. Back up all key data before the end of the year, and print it out. Get out those old manual typewriters in case the power goes out, and be in the office over the big weekend.
IV - Resources
Y2K testing software programs & websites
Software designed to test (Some are free)
National Software Testing Labs, the standard endorsed by many major hardware makers, will test your PC's CMOS and its BIOS for Y2K compliance. Software can be downloaded from www.nstl.com/downloads/y2000.exe /A
Test2000 from www.rightime.com
Get Check 2000 from www.gmt-uta.com/welcome.cfm
Websites; Y2K information & links to vendors
Peter deJager's Year 2000.com
Legal issues: www.Y2K.com
General information: www.compac.com/year2000 and www.year2000.com
Sample warranties and definitions: www.itpolicy.gsa.gov/mks/ yr2000/contlang.htm
Year 2000 conferences and seminars: www.year2000.com
Embedded micro-controllers in non-computer equipment such as elevators, HVAC and security systems: www.iee.org.uk/ 2000risk
Articles
Testing law office systems: "2000: A Computer Odyssey," Allen L. Shapiro and Robert S. McNeill, ABA Technology and Practice Guide, p.4, vol.2, no. 1, Summer, 1998.
"The Year 2000 Problem," Gene Barrett and Sharon R. Klein, Law Office Computing, February, 1998.
Software designed to test
Norton 2000; MacAfee's Toolbox 2000; Check 2000; many others
Millennium Now promises to correct both the BIOS and the CMOS, but sits resident in memory, taking 5-6 Kilobytes.
Software designed to test and fix
Shield 2000--This software/hardware program, recommended to me by my own computer consultant, promises to test and fix hardware, software and even data files, and warrants the hardware fix. For information and a free demo, go to http://www.fennercomputertech.com/pfenner/year2000infopage/ and click on "Year 2000 Info Page." You may need to download the visitor software.
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Special Thanks to Roger L. Rutherford, who added much material to our list of Resources.
Author: Ms. Cunningham is the principal of Cunningham & Colleagues, P.C., in Barrington, IL, www.bzlaw.com where she practices business law and estate planning. She writes a monthly business law column for Illinois lawyers, at www.iicle.com, and has previously taught both Business Law and Probate Law. She is a frequent speaker and author on business law and estate planning topics. She can be reached at cunning@bzlaw.com .
DISCLAIMER:
"This article has been written in an attempt to help the manager of a small business with Y2K issues. Every effort has been made to provide accurate information concerning Y2K issues, but the author is not a computer expert, nor is this information intended to be legal advice. Please be sure to consult your computer software and hardware providers, and your legal counsel."
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